Are we allowed to enquire about any other possible companies that could be leading people to financial and emotional ruin? Are we allowed to actually name here on the forum other companies out there to beware of ? How do I ever know if I am dealing with a potential scammer??? Very difficult as someone trying to buy their first investment property (and by the way wants to go +CF until at least the family home is paid for)
In my opinion any ‘company’ that is getting a commission between you and the property is potentially taking some of your investing ‘cut’, whether that be a developer, a marketer, RE agent, syndicate organiser, bird dog, or other!!
Not that they are all necessarily sinister.I think the average ‘company’ is more likely to be marketing _ve gearing properties, and brand new ones at that, with tricksy depreciation schedules to make them look more CF+ve after tax than they really are (say if you lost your job, you’d feel the ‘real’ loss.)
I think companies that own commercial property (i.e. medical centre in cairns, the one I looked at) and you buy a slice, like a syndicate, can be OK as in, legit, but only with what I’d call pretty average guaranteed returns, but then again with no work to do or outgoings, and sometimes very little risk.
If you bypass the companies and look yourself you can often find better deals, but it takes a lot of time.
So really it all depends on whether you enjoy it and have more money than time, or more time than money.
I had more time than money so I chose to look myself.
Also I enjoy being in control of my financial decisions. I wince for a lot of people who pass their decisions to experts to make for them, who turn out to be middlemen with their own agenda (such as ANZ financial advisors.)I think you learn the most by analysing, or learning to, analyse your own deals and staying away from companies. Later on when you understand it a bit better you can tell the wolves from the lambs more easily.
Steve McKnight analysed one of those flash gold coast developments which ‘guaranteed’ a certain yield which seemed really good. Step by step he pointed out the flaws in the numbers and which bits didn’t make sense, until the true ‘yield’ was discovered which may have been about 1/2 the advertised one.
Some of those developments target their selling to people who couldn’t understand the numbers if they tried (i.e. Mr and Mrs Normal.) They bamboozle them and make it sound really great when it’s not that good.
You just need to be able to follow every single step of their figures and ask the ‘what ifs’ that they don’t count on.
cheers-
miniThanks Mini for your advice
Hi Tracey,
Mini has made a number of good points.
Ultimately whether, or not, you use a ‘Company’ is your choice.
The difficulty you have is that investing is a very individual thing and while some people would gladly use ‘Company X’ there would be an equal number of people who would not touch ‘Company X’ with a barge pole. Some of the posts in ‘Guru’ are an example of the divergent opinions around.
At the end of the day you do need to undertake your own learning process, undertake your own checks and balances to ensure what you buy (or consider buying) suits you and your individual preferences, style, budget etc.
Derek
Yep Derek you are right. I have investigated that track and currently have about 3 options I am considering which one is through an ‘investment property’ company. But I am finding that I am doing al my own checks anyway! There is aproperty that I want valued and it has taken 6 weeks so far for the ‘investment company’ to come back to me with off plan specs let alone contracts to get a valuation done before signing…..just has to make me wonder really. I think Ill didge it and do the hard yards myself. Just wish I had a fairy godmother.but this site is just so helpful, I hope I can be of use to someone else one day! Thanks again.
You will be of use to someone in the future and even by asking questions you add to someone’s learning experiences.
The silliest questions are those not asked.
Derek
Exactly. I am actually going through all topics that interst me through the pages and pages here on the General forum and am learning things from others questions, usually those who are less experienced than moi, but all the same I have to say this forum is just fantastic and was a great idea!
“How do I ever know if I am dealing with a potential scammer???”
The decision to invest time and/or money into any “investment company” should involve the same due diligence as any other investment decision i.e. stock, bonds, property.
Request customer testimonials, a corporate history and information which details the “company’s” success rate – and make sure it can be validated.
Most businesses in this segment will provide this information due to their ability to remain in business being reliant upon “credibility” and “reputation”.
If they decline, or the information cannot be validated, move on to the next company.
“it has taken 6 weeks so far for the ‘investment company’ to come back to me with off plan specs let alone contracts to get a valuation done before signing”
If a “red flag” exists, such as the delay you have referred too, and the “company” cannot provide an explanation that you are 110% comfortable with, end the business relationship – they are putting your opportunity at risk.
9 times out of 10 these decisions are based on “gut instinct”.
— Michael
Everyone wants a *cut* of your money in *any* deal, therefore the benefit is to limit the amount passed onto those people as it ‘eats’ into your profits..
As was pointed out by a GURU or TWO, the profit is made in the purchase, not the sale..
Was interesting the other day, whilst attending a work related course , one of the other attendees was an ‘owner builder’ in discussions he pointed out how many developers save $’s on building costs etc or cut corners ( we probally all know friends who have *new home horror stories* ), he said that sometimes 1/3 of the cost of the house is profit for the builder/developer… i’d always thought about 10% so it took me back a bit [8]
As for some investment property companies.. look at each project on it’s merits, weigh up the pro’s and con’s of the investment ( units, Vs retirement villages, Vs houses etc.. )
Ask many questions, but only proceed on something that makes ‘you’ comfortable, at the end of the day it’s your $’s
PS- Derek, some good advice in your post’s of late.. thanks[^]
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
>>he said that sometimes 1/3 of the cost of the house is profit for the builder/developer… <<
It cannot of course be denied that that may be the case s-o-m-e-t-i-m-e-s.
But is also fair to say that the person you met is doing a fair bit of dreaming as generally builders do not make a large profit.
Even if it was the case it has got nothing to do with the endbuyer (or anybody else) as presumably the house is sold at market value.
A builder is entitled to be compensated for his skills, his capital investment, the headaches he encounters dealing with owners and the risks he takes on.
Pisces
Pisces..
Would 10% be more realistic in general cases then..
Only have this figure as a ‘Chippie’ i knew went onto becoming a builder..
Get a bobcat in to clear the block…get invoice, add 10%
Get plumbers in, add 10%
Get Power put on-site, add 10%
Get Grano workers to pour slab, add 10%That’s how he progressed anyway..[
]Are some builders ‘dodgy’…? well, are some Real estate agents ‘dodgy’…?
As with anything some good, some bad ( like R/E Guru’s i guess )
Guess they’re only as good as rhere last job..
Bigger building companies i’ve found ‘do’ have some better teams working for them, if your lucky, you get that team building your house..
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
I know two builders, Im gonna go ask some questions, if I get anthing of relevance I will let you all know
cheers
elvesIf you try to find a deal you would be hard put to find a deal which looks as if it may be producing a 25% profit on cost.
Those kind of deals are few and far between.
I said ‘looks like’ because often there are unforseen problems which eat into the builder’s pocket.
I am not a builder but I would think that a 10% profit wouldn’t be too far off the mark for most projects.
Pisces
This topic has changed a bit but I feel it is important to let you know that as a builder previously, I know that builders do make different margins. These are anything from loosing money on a job to making 30-40%. This often depends on the size of the builder and the bigger builders dont take on small jobs or jobs with too many unknowns and risks, therefore they hardly ever come up short and in fact most realise about 30%. The small builders who dont have enough work and must cut prices to get jobs end up cutting out any provision for risk etc and some end up making very little or loosing money.
The main point that I wanted to point out is that all the large project home builders like Clarendon, Metricon, Coral, Tamawood, etc have increased their prices by much more than the CPI (some due to shortage of labour) and this is one of the main causes of housing affordability (especially for 1st home buyers) dropping to an all time low. One example is a builder which I got a price of $85000 for a 240 M2 house 18 months ago and their price is now $111000 for the same house. That is a 30% increase in 18 months or 20% pa rise in price. I think these builders are making a killing and nobody seems to care except the poor first time buyers.
Buidlers usually collect 10 to 15%
Developers collect around 20% IF all goes well.So if they are both, then 30% would be conceivable. But for this they are taking on many risks, headaches and effort. Many developers think they are making a decent profit but all they are really doing is realising the capital gain in their underlying land value.
Extensive list of new Perth property available for sale.Alternatively, become a joint venture partner in one of our property development partnerships – contact me to find out why our developments are unique. John – 0419 198 856
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